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A primer for crisis management: each month this year, Risk Management Magazine will feature a story on crisis preparation and response. This month''s introductory article offers an overview of the topic. The issues outlined here will be explored in greater depth over the next eleven months. In February: the first of three articles demystifying business interruption policies and claims.

Article Excerpt
A business facing a crisis is compromised much as a human body diagnosed with a critical condition is weakened. Although it may be impossible to simultaneously get all systems up and running at peak efficiency, it is important to address each element, fix problems as they arise and recognize that the failure of any one system could make it impossible for the business, or the body, to survive.

Crisis management is a natural extension of risk management. Risk management focuses on strategies for mundane as well as urgent matters, and crisis management focuses on the most dramatic events and circumstances that could disrupt operations or make it impossible to continue business. Both disciplines need to be applied before and after the risk events that they address.

As with all risk management, the probability of events dictates the work and resources that go into a particular project. The contradiction with crisis management is that businesses must not only prepare for the most likely causes of a crisis, but also for those that are remotely possible. For example, a business in San Francisco takes precautions against earthquakes; but a technology firm in Iowa cannot ignore the unlikely possibility of a tornado, since the first strike in one hundred years could be deadly.

To put an effective program in place or to complete a partially developed system of response, several key areas must be addressed.

Business Continuity

A business continuity plan is the strategy for operating under adverse circumstances, whether that is at a reduced level or an alternative location.

Business Impact Analysis. The plan begins with a business impact analysis that identifies the mission-critical functions, i.e., core operations that must continue under even the most extreme circumstances. For example, a blood-collection agency must ensure access to the blood it has collected or it is effectively out of business; a stock brokerage must have access to the exchange or it cannot execute trades on behalf of its clients. Aspects of the business that should be considered as imperative include supply chain management, call center functions, security protection and upper management issues, such as alternative financing, insurance protection, redundancy of seminal documents (incorporation papers), data backups and contracts.

Relocation. The business continuity plan also provides for how and where operations will function if primary facilities are inaccessible in the aftermath of a catastrophe. Many, although not all, of the businesses headquartered at the World Trade Center in New York last September quickly relocated employees to alternative sites, including hotels, suburban office space and regional offices....